While state-owned steel companies continue to roll out multi-billion dollar expansion plans across the Middle East, times are tough for any steel producer that does not have government backing.
The steel industry in the region has been voicing concerns about the independents with no discernable track record in the sector for some time now, although producing steel billets and reinforcement steel for Dubai’s construction projects appeared to be a good idea back in 2007 or 2008. Today, those plans look completely misguided.
But there are some green shoots of recovery, and the region’s steel industry is ramping up production.
Steel production for Saudi Arabia, the UAE and Qatar is expected to rise to 8.45 million tonnes a year (t/y) in 2010 up from 6.8 million t/y in 2009.
But despite the promising production figures and rising steel prices, independent steel producers still need to formulate a plan that will secure their future. Concerns over gas supplies and financing may be at the forefront of worries, but GCC governments are also becoming more aware of environmental issues. And independent producers know that a cheap steel plant emitting hazardous fumes will no longer be accepted.
The solution for independents is to form partnerships with either the state-owned steel producers or the established global players from outside the Middle East. Whether that is by giving the state-owned companies a share of equity or aiming at high value-added steel products with companies such as Luxembourg-based Arcelor-Mittal is a decision for the individual companies.
There are advantages to both solutions.
With a government-owned entity issues such as gas and finance will become easier to deal with, while working with a steel giant from outside the region will bring decades of experience and expertise.